Today is shaping up negative for Yunnan Tin Company Limited (SZSE:000960) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. At CN¥17.05, shares are up 7.0% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the downgrade, the consensus from ten analysts covering Yunnan Tin is for revenues of CN¥38b in 2024, implying an uncomfortable 12% decline in sales compared to the last 12 months. Per-share earnings are expected to bounce 97% to CN¥1.31. Previously, the analysts had been modelling revenues of CN¥51b and earnings per share (EPS) of CN¥1.35 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a sizeable cut to revenue estimates and a small dip in earnings per share numbers as well.
What's most unexpected is that the consensus price target rose 11% to CN¥19.96, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 12% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 5.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Yunnan Tin is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Yunnan Tin's revenues are expected to grow slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Yunnan Tin after today.
There might be good reason for analyst bearishness towards Yunnan Tin, like its declining profit margins. Learn more, and discover the 2 other risks we've identified, for free on our platform here.
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